DTAA applicability on income of NRI, resident in 3rd country, Income Tax

[Roger Pinto]

Can a NRI (who is neither a resident of US nor India) claim DTAA benefits on royalty income earned from an entity in US. This NRI pays taxes on his Indian income and hence has a 'Foreign tax identifying number (PAN number)'.

Note that on filing of successful W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)' form, the withholding tax rate gets reduced to 15% (from 30%) on the royalty income earned from US entity.

Further what is the position, if this NRI is resident of a 3rd country (say UAE) which does not have a DTAA treaty with US. This could be because UAE does not have income taxes.

What happens to the witheld tax by US, at whichever rate applicable (15% or 30%). Is the NRI required to file returns in US.

Also (if eligible for DTAA) as this income would qualify for 'Exemption method', would disclosing it under 'Exempt Income' suffice for that NRI's Indian tax returns compliance.